Waseem Ghulam, Chief Risk Officer of boutique asset management firm Polar Capital, spoke at our recent webinar about their use of factor attribution to analyze key drivers of change in their portfolio factor exposures. Investment Metrics’ Head of Client Success for EMEA and APAC, James Carrington also joined to demonstrate the Style SkylineTM factor exposure and DeltaZoomTM factor analysis tools.
The conversation focused on several key points:
- Polar Capital’s approach to factor analysis
- How frequently the firm reviews factor exposures
- The factor analysis experience before and after DeltaZoom
- The power of real-time, visual factor analysis
The following overview is based on a webinar attended by approximately 50 professionals on July 8, 2021.
Factor analysis approach
Polar Capital is a boutique asset management company built around 16 investment teams, each with their own autonomous investment style and investment process. Its decentralized investment methodology means portfolio managers are allowed to run their portfolios as they see fit. With predominately equity funds ranging from global to regional, and focusing on the technology, healthcare and financial sectors, the firm’s strategy styles are diverse.
When it comes to factor analysis, Polar Capital has always used some form of style analysis, including Investment Metrics’ Style Analytics tool for nearly 10 years. Alongside his CIO, Waseem participates in monthly oversight reviews to look at different elements of the firm, from past performance and macro factor analysis, to portfolio liquidity and style. More importantly, they take a more frequent, dynamic approach to analyzing different factors and the trends, evolutions, and causes of changes in factors since the inception of funds.
Before and after DeltaZoom
For Polar Capital, it was always important to understand factor changes. Waseem explained that before DeltaZoom, the process of drilling down to the biggest contributors of change was very tedious, manual work to identify not only what changed, but specifically the underlying factors and causes of change. Getting answers took a great deal of time and provided a limited view of factors and changes.
DeltaZoom offers Polar Capital a faster and more comprehensive approach to its former manual process. Today, the firm obtains immediate results across a wider and deeper view of factor changes. The new process is interactive and on-line, giving Waseem and his team the ability to instantly share and discuss factor analysis results in real-time during meetings. In addition, DeltaZoom provides an aggregated view of factor changes by region and sector, enabling Polar Capital to drill through those aggregations to individual stocks.
The power of visual factor analysis
Laser-focused on meeting expectations for service and investment performance, Waseem says it is absolutely essential to Polar Capital’s process to be able to verify factor analysis with quantitative evidence. DeltaZoom helps Polar Capital enhance communication and interaction with its portfolio managers. In review meetings with portfolio managers, Waseem and his CIO team spend time delving into factor changes in real-time. This ensures that portfolio managers understand the factors and why they are changing, as well as facilitate discussions about the makeup of portfolios.
Data visualization also provides an excellent way to easily understand biases in terms of style. He says DeltaZoom’s waterfall charts are extremely powerful in terms of understanding and communicating changes in factor exposures to others.
About DeltaZoom
Asset managers can use DeltaZoom to give their investors real insights into how they manage their portfolio and clearly explain why a factor exposure has changed. The tool also enables asset owners and consultants to save time by instantly isolating and understanding the changes that matter the most to them across factors. Learn more about DeltaZoom here.
